Up, up and away: 10 to 100% increase in gas prices proposed

High-level meeting to deliberate on the proposal today.

ISLAMABAD:

The government has worked out a plan to increase prices of gas from 10 to 100 per cent from the new financial year beginning July in a bid to end cross-subsidy, which was agreed to with multilateral lenders.

Sources told The Express Tribune that the plan would be tabled before a high-level meeting today (Wednesday), to be chaired by Minister for Petroleum and Natural Resources Dr Asim Hussain, to take a final decision.

The plan will be implemented after seeking formal consent of the Ministry of Finance and Planning Commission.

According to sources, the government is particularly focusing on reducing cross-subsidy which comes in the range of Rs35 to Rs40 billion per annum. Under this system, fertiliser manufacturers are supplied gas at reduced rates and the balance is received from the textile and other industrial sectors in the shape of higher gas prices.

The textile sector has been protesting against the cross-subsidy to domestic and fertiliser sectors, saying it leads to an increase in cost of doing business and makes textile products uncompetitive in the international market.

Oil and Gas Regulatory Authority (Ogra) has already decided an increase of Rs5.08 and Rs7.54 per million British thermal unit (mmbtu) in gas tariffs for consumers of Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) from July 1.

CNG price may rise 50%

Sources said the petroleum ministry had prepared a proposal to bring the price of Compressed Natural Gas (CNG) on a par with that of petrol and as a result CNG price would rise by around 50 per cent.

The proposed increase in gas price for fertiliser plants was 100 per cent, which would remove subsidy from the sector, sources said, adding the government was also providing Rs11 billion in annual subsidy on feed stock of fertiliser manufacturers.

For domestic consumers, sources said, the petroleum ministry wanted to increase gas prices by 10 per cent.

The government has already committed to multilateral lenders that it will end subsidies in all sectors gradually and this proposed plan of gas price increases is part of the commitment.

The Planning Commission has recommended to the government to increase gas prices by 15 per cent on quarterly basis to bring them on a par with other fuels.

Govt may increase gas outages

As the country is facing acute power shortages, the government is working on a proposal to increase gas outages for Compressed Natural Gas (CNG) stations from two to four days a week in a bid to divert gas supply to power plants, sources say.

A high-level meeting in this regard will be held in the Ministry of Petroleum today (Wednesday) which, among others, will be attended by officials of Sui Northern Gas Pipelines Limited, Sui Southern Gas Company and Karachi Electric Supply Company.

The ministry will seek a formal approval for the proposal from the Economic Coordination Committee of the cabinet.

Sources said the ministry had prepared a proposal for suspension of gas supply to CNG stations for three to four days a week, adding the schedule of gas outages for industrial sectors might also be revised.

Published in The Express Tribune, June 29^th, 2011.